A Study On The Causes And Economic Consequences Of Bond Default Of Tahoe Group

The bond market has been vigorously developed as China continues to improve the financing function of the capital market in recent years.Financing through the issuance of bonds has become the major channel for corporate financing.With the breaking of "Rigid Redemption" in 2014,the number of bond defaults has gradually increased.In the year of 2018,the number and scale of bond defaults reached the highest level in history.The default events of bonds not only cause economic losses to investors,but also wreak havoc on the financial market,which in turn triggers a "credit crisis" for companies that intend to issue bonds for financing in the future.Based on the background of economic downturn and frequent bond defaults,the investment and financing of real estate companies continues to tighten.To stabilize the bond market and safeguard the rights and interests of investors,it is indispensable to probe on the causes of bond defaults and to reduce the risk of bond defaults.This paper adopts the case analysis method and takes Tahoe Group,which is engaged in real estate,as the research object.Through analyzing its bond default cases,the paper identifies the causes of its bond defaults,and analyzes the economic consequences that ensue them,to collect experience and to enlighten the issuers,investors and regulators.The occurrence of bond default is often caused by multiple factors,including the external impact of macroeconomic downturn and policy changes in the real estate industry,and internal reasons of the company itself.First of all,Taihe Group’s development strategy is more radical;Secondly,the profitability of enterprises has been declining year by year.Third,the lack of risk management and control;Finally,the weakened solvency and high financing costs lead to continuous deterioration of the financial status of enterprises,and even cash flow fracture.Then this paper analyzes the impact of bond default events on all parties.For issuers,after the outbreak of bond defaults,affected by cross default clauses,short-term debt repayment pressure increases sharply,financial status deteriorates further,refinancing ability decreases sharply,and future debt repayment and continued production suffer a huge blow.For creditors,the possibility of debt recovery is small,investment willingness is greatly reduced.For the capital market,the loss of credit financing function will lead to the systemic risk of the bond market and even the financial market.Finally,this paper puts forward the corresponding concrete suggestions for the problems of Taihe Group.Firstly,it is suggested that enterprises formulate reasonable development strategies;secondly,they should take more measures to improve profitability;thirdly,they should strengthen internal risk prevention;fourthly,they can introduce strategic investors to carry out debt restructuring.This paper intends to introduce specific cases as references and to a certain extent,enriches the insufficiency of the problem research on the bond default of real estate companies through the research on the causes and economic consequences of Tahoe’s bond default,hoping that other real estate companies could draw lessons from it.